Case Bets: Multimedia, Philadelphia, Maryland

Here’s a vivid account of Multimedia Games‘ reversal of fortune, how a company focused on B-level gaming markets established a presence in Nevada, Atlantic City and Pennsylvania, and improved its value sufficiently to make it a takeover target for Global Cash Access. One of the keys to Multimedia’s turnaround is slot platform TournEvent, which allows for multiple tourneys to be run simultaneously. Having gobbled up PokerTek earlier this year, Multimedia finds itself on the verge of being swallowed itself.

Analysts, however, don’t think the $1.2 billion GCA offer — expected to save $30 million in synergies — to be the end of the story. “We would not consider beyond the realm of possibility the potential for another, more pure-play concern within the equipment space, to step in with a competitive bid,” said one analyst. “We could foresee a scenario in which another slot manufacturer looks at the [cash flow] offer currently on the table and, through the identification of more meaningful cost synergies, puts together a richer offer,” chimes in another.

Here at S&G, we tend to agree with GCA CEO Ram Chary‘s sentiment that pairing his company with Multimedia brings “deeper and more integrated solutions to casino floors.” It also enables Multimedia to expand further, since GCA is licensed in several states where Multimedia is not. The transaction is likely to hang fire until Oct. 8, when GCA’s breakup fee with Multimedia escalates threefold, to $32.5 million.

* Also hanging fire is the question of where the last casino in the Philadelphia area will be placed. City fathers have expressed their preference for a downtown site, in which case the go-to guy is Bart Blatstein, “better known for helping turn a former industrial zone called Northern Liberties into a hipster enclave, complete with a Vespa store.” His Provence casino project would encompass the old Philadelphia Inquirer headquarters into an entertainment complex that includes the expected casino amenities (retail, a comedy club) and unexpected ones (a botanical garden).

Though Penn National Gaming nixed its plans for a site south of downtown, Cordish Gaming is holding fast, arguing that — by being near multiple sports stadiums — it will have no “off” season and pedestrian traffic will be consistent. Cordish also happens to own a share of nearby entertainment hangout Xfinity Live. In the end, Cordish’s best argument (as always) is the smash-hit numbers put up by its Maryland Live! casino in Arundel Mills. If Philadelphia’s goal is to make the most dollars possible, you have to give Cordish serious consideration.

* Speaking of Maryland, the Maryland State Lottery & Gaming Control Agency is tempering justice with mercy, removing a lifetime self-ban on problem gamblers that has been described as “excessive and redundant.” The state would keep its renewable, two-year ban in place, however. “There are some legal concerns about how enforceable the lifetime ban is anyway,” Control Agency Director Stephen Martino told the Baltimore Sun. The National Council on Problem Gaming supports the move, arguing that a lifetime ban is counterproductive, setting a high bar that disordered gamblers might be afraid to meet. Although there are 576 people on the self-exclusion list, the NCPG estimates there could be as many as 150,000 problem gamblers in Maryland at large.

Meanwhile, Maryland Live! and Horseshoe Baltimore have engaged in prank-like activity in their competition for players and employees. The most aggressive move may have been when Horseshoe sent a mobile billboard to drive around the Maryland Live! parking lot. For both casinos, publisher Alan Woinski warns, it’s a case of gather ye rosebuds while ye may, until MGM Resorts International‘s National Harbor opens and pre-empts all the Washington, D.C., and northern Virginia business. Ironically, both casinos are using mobile billboards from the same rental company to get their message out. Whoever ‘loses,’ Baltimore Washington Billboards wins.